Anyone pulling money out of MF Global?

I can see the USA Congress using the MF Global failure to protect clients funds as justification to require new regulations and controls of FCM firms and commodity transactions. Then the cost to the Federal Government of enforcing the new regulations and controls will be used to justify the enactment of a new tax on financial transactions as Germany and France are seeking. The Federal Government will then have the new tax revenue they seek but will not adequately enforce the new enacted regulations and controls and we will still have MF Global like failures.

 

Our only defence is to not keep too much capital with one firm.

Ideally say not more than 20% of your cash.

Keep back up reserves.

This is not easy, as most retail guys are short of cash most of the time anyway and are also reluctant to pull out profits as we want to compound to infinity (ok, maybe not infinitity but just to $10 million ) before we pull out any big profits.

The tax man however takes his cut from our account every year

 

Exactly - If they don't get this right the implications are huge. Moving open positions was clearly job one. But stranding accounts that were flat raises a large number of questions. Where are the controls / audit trails that should easily identify movement in and out of segregated accounts. More and more this smacks of the well connected looking out for themselves at customer expense.

I'm hopeful that Monday see's massive liquidation (cash wire our) of flat accounts. By rights we should see no more than an 11% haircut. I'll gladly split my 11 with the legal system provided justice is served (ie criminal and civil actions) to the crooks who stole our funds. Of course justice tends to be up for sale more often than not.

 

You sound like me. This is exactly the sort of thing that I could envision.

All about "keeping up appearances".

 

A recent DealBreaker article (old news at this point) does have some interesting links that provide drill down into the question of permitted investment of segregated customer funds by FCM's. There is no final ruling on 17 CFR Parts 1 and 30 Investment of Customer Funds and Funds Held in an Account for Foreign Futures and Foreign Options Transactions so it looks like segregated funds could legitimately be invested in foreign soverign debt based on regulations passed in 2000. Not Good. In this case it appears customer funds were 'miss-placed' in the rush to liquidate positions held by the corporation. If you drill into the expanded comments section you will see several referenced interactions between CFTC and MF Global during the comments period. Here is a direct link to the comments file:

http://comments.cftc.gov/PublicComments/CommentList.aspx?id=894

 

I am not a lawyer, so I don’t see the legality in holding money that you can identify as customer funds on deposit. If they can say, ok we know this much money is customer funds and it appears 10 to 15% may be missing, then how can they hold the rest for any reason? As some here have said, wire out the 80%+ then spend the time to figure out the exact details of the rest. How can any claim, from anyone, for any reason take precedent over customer funds?

I am not sure the SIPC, SEC, bankruptcy judge, and the trustee understand traders and trading. They seem to think that traders would be happier with 100% a few years from now with no access to your funds until then is better than the vast majority of your money right now.

I agree that the CME and CFTC should be sued. Not only did they drop the ball in monitoring and regulating the firm, they have failed to take the necessary actions right now to get customers access to their positions and funds in a timely manner. Not to mention that they have gone on and on telling everyone forever that segregated funds are safe, which would appear to be a case of false advertising at least, and fraud at worst. What is the disclaimer now? “Segregated funds may be taken by anyone at the firm for any reason but we can’t stop them, and we will not do anything about it until after the fact. Then we will freeze your accounts so you can’t trade or have access to your money, we can’t tell what is happening or when it will happen, we can’t tell you how much of your funds you will get back, and it could take many years to get it straightened out. Welcome to the CME.”

 

The CFTC provides the following on their website regarding segregation of customer funds:

In this case, I think cash is being constrained until a full accounting of the short fall can be made. This makes sense, but it does represent an opportunity loss for customers. Its an awful position to be in. Lots of IB's cleared through MF Global. At this point, I'm assuming I am an 'unsecured creditor' of a bankrupt FCM. The move to force MF Global's brokerage unit into bankrupcy probably helped keep more of our segregated funds intact - Which really says something about the volatility of these situations. Controls only look good on paper it seems, unless they are backed with enforceable penalties. Lets face it - even the death penalty is only a marginal deterrence to murder.

 

Amen - I totally agree. Sometimes I've felt it was a bit silly & inconvenient to have a couple of brokers. These days that feeling has totally vanished . .

 

I got this through a trader who was tutoring me at one time, she/he is an ocassional e-mail aquantance, a mid-size trader, never given me any reason not to take her/his word at full face value.

She/he said most segregrated funds have been accounted for after the CME finished their audit. Aproximately 15,500 accounts and about 1.5 billion in assets were transferred out Friday/Saturday to other firms.

The CME thinks that an error took place in low level management accidently transferring money into a MF global house account from the segregrated accounts.

I checked the CME site and found this that confirms my source to a degree.

http://cmegroup.mediaroom.com/index.php?s=43&item=3206

She/he mentioned a tweet on twitter about the CME reducing initial margin to accommodate the MF global transfer so I double checked on the CME site and found a confirmation.

http://cmegroup.mediaroom.com/index.php?s=43&item=3208

While I don't like to speculate in rumors, I'm hoping that we could find some additional confirmation from the forum members to validate this latest piece of information. Most of us here are the "trust but verify" kind of traders, hopefully the media will pick up on the story, we'll get some documentation.

(My own cynical thought..... this is the “public story” that will be given to the press and media about the “error”, probably the “error” occurred allot higher up in management and they're already hot on the trail.) (I also feel that the exchanges realized that they had a very BIG problem with the segregration principal being violated and threw all their resources at finding that money.)

I trust my source to the degree that I am now starting to feel more comfortable, but then again, let see if we can get some actual confirmation somewhere.